BP shattered City forecasts today with a 148% surge in third-quarter profits to a record $10 billion (£6.43 billion) as new chief executive Tony Hayward's turnaround strategy really kicked into gear.

The shares jumped 25¾p to 463¾p as the stock market applauded the figures. But analysts cautioned that the collapse in the oil price from its record $147 a barrel in mid-July to just $62 a barrel now meant the near-term outlook will be far more challenging.

Hayward does not necessarily agree. "I believe BP is well positioned to cope with such volatility. Our balance sheet is strong and we have committed less of our portfolio to high-cost options like tar sands and gas conversion than some of our peers," he said. "We think the current turmoil may in fact create opportunities for us and we will look at those very closely."

Over the past three months BP had an average selling price of $111 a barrel compared with $71 a barrel a year ago and Hayward admitted: "Although it has fallen away sharply, the high oil price of the third quarter obviously helped our absolute result."

Seymour Pierce analyst Kevin Lapwood said: "The upstream performance has been very good but the big surprise has been the outperformance of the downstream side."

Tony Shepard of Charles Stanley agreed that while the boost in exploration and production income had been expected, Hayward's turnaround at refining and marketing appeared to be kicking in faster than most analysts expected.

Hayward has pledged to raise BP's dividend and today's quarterly payout of 8.705p is a massive 64% higher than that paid a year ago.

He said: "Our aim remains unchanged to grow that dividend through time in line with our view of future sustainable performance."

BP said it spent $8.9 billion on capital projects and acquisitions in the quarter. This included the reopening of the Thunder Horse platform in the Gulf of Mexico, which was shut down by Hurricane Katrina.